Attracting the interest of the low and medium income earners in the society towards voluntarily employing insurance as a means of alleviating their suffering whenever losses occur is the current focus of practitioners in the sector. NIKE POPOOLA writes on the renewed efforts by the regulator to develop this segment of the market.Over the years, the Small and Medium Scale Enterprises sub-sector of the economy has remained the largest employer of labour in the country. Under this category, those with or without education have been able to create jobs, mostly as a way of making ends meet.Unfortunately, a substantial percentage of this class of people in the society are not under any form of insurance cover, thus making the Nigerian insurance industry to rank among the industries with the lowest insurance penetration worldwide.This has been blamed on the operators neglect of the micro insurance segment, which concerns the development of policies that help to alleviate the suffering of the low and medium levels of the society.These insurance policies, which attract low premium, meet different needs of the individuals and provide some form of compensation for the insured whenever he suffers a loss.When a larger part of the population is involved in insurance, it helps the industry to build a large pool of funds, of which the claims of the few are paid for when losses occur.At present in the country, there are no specific provisions in the regulatory framework relating to micro insurance underwriting and delivery.That is why micro insurance is largely provided by insurance companies, under the framework established by the Insurance Act 2003.The informal sector is not yet subjected to regulation by the National Insurance Commission, but micro insurance providers are subject to the same regulatory laws, like other insurance products.With renewed focus to develop this segment of the business, NAICOM constituted a micro insurance committee to draft a micro insurance guideline for the Nigerian market. The committee has already submitted a draft guideline to the commission for a review in order to engender necessary action.NAICOM also entered into a collaborative agreement with GIZ, a German agency for sustainable development to conduct a diagnostic study on microinsurance policies in the country.Part of the objective includes opening up and developing the insurance market at the grass roots, and by extension, increasing the sectors contribution to the Gross Domestic Product.A manager with NAICOM, Ms. Adeola Bakare, observes that out of the worlds population of about seven billion, four billion people live on income of less than eight dollars per day.She says, Besides suffering daily deprivation, low-income households are often more exposed to risks, ranging from diseases to crop failure as a result of the consequences of climate change, and in extreme cases, loss of household bread winner.One way for the poor to protect themselves, according to her, is through micro insurance. She says that this policy can help low-income households to manage risks and assist them to maintain a sense of financial confidence in the face of significant vulnerability.For this reason, she stresses the need to explore ways to significantly increase the number of households that have access to insurance in the country, while enhancing the benefits attached to such policies.Bakare observes that in the country, voluntary purchase of micro insurance is rare. She blames this on the narrow range of available products, as many products are poorly designed by employees who have limited understanding and experience of micro insurance.She says, If insurers do not understand their customers needs, finances and cultures, then, the design of effective products may be seriously impeded.The Immediate Past Director-General, Nigerian Insurers Association, Mr. Ezekiel Chiejina, describes micro insurance as the protection of low-income earners against specific perils in exchange for regular premium of premium or contribution proportionate to the likelihood and cost of the risk involved.He says that micro insurance should cover a variety of risks, such as illness, death and property losses that are insurable.For this reason, he says it helps consumers to transfer their risks and purchase financial security that they need to live or grow their businesses with some peace of mind.He, however, says, One major threat to the development of insurance in Nigeria is a lack of awareness. The target market for micro insurance needs to be educated and convinced about the benefits.While explaining some cogent facts about this policy, he says that micro insurance is part of the governments policy to alleviate poverty. The consumer, he says, pays a little premium to get benefits that will be higher than his payment.Chiejina adds, Micro insurance can help to acquire property, protect savings, support old age, assist during disaster periods, and help to alleviate the problems of the poor in their countries.The expert notes that the conventional distribution channels of broking and agency systems cannot effectively support the operation of micro insurance.According to him, it would require the development of new channels such as nongovernmental organisations, microfinance institutions, bancassurance, chain supermarket stores or other institutions with nationwide networks.He explains, Agency models can be developed, not only to distribute micro insurance but also to fully manage the customer relationship and coordinate the transactions in areas of registration of clients, premium collection and claims processing.The Group Managing Director, Mutual Benefits Assurance Plc, Mr. Akin Ogunbiyi, says that the development of the retail segment of the business is the way forward for the sector.Micro insurance, he observes, has huge benefits that would accrue to any policy holder, while also taking insurance to the grass roots.He says, Insurance is supposed to be the backbone of any national economy, insurance is a medium where you can put funds together and make it available for investment in other sectors. But unfortunately, the country is yet to develop insurance at the retail end.Ogunbiyi points out that insurance is the most effective means of reducing the vulnerability of these adverse effects of the insuring public.He says, Insurance protects against unexpected losses by pooling the resources of the many to compensate for the losses of the few. The more certain the event is, the more insurance becomes the most economical form of protection.The insurance expert adds that the operation of an efficient, flexible and affordable micro insurance system can be offered in the areas of health risk, property risks, agricultural risks, life risk and natural disasters.According to him, loan protection insurance ensures that in the event of death, all outstanding repayments are written off. Health and disability insurance, on its part, enables the poor to cover the cost of medicine and hospital bills as well as protection of income loss due to sickness or injury.Citing examples of some micro insurance products in the industry, he describes individual savings and protection plan as an anti inflationary savings and income protection plan targeted at mobilising savings.He explains that the safeguard insurance product covers the insured from physical damage to property by fire or any violent and visible means, life and disability benefits and third party liability at subsistent level.
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